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No oil price review before June 1, two states cut tax

Need to survive, say companies Congress calls for local tax cuts, BJP leaves it to state units

BS Reporters  |  New Delhi 

On a day of high political drama, oil marketing companies decided to put to rest speculation of a rollback in and said a review would be possible only on June 1. Key United Progressive Alliance (UPA) allies, the Dravida Munnetra Kazhagam, the Nationalist Party and the Trinamool Congress, decided to stay away from a Cabinet meeting slated this evening.

The furore over the 12 per cent rise in has made difficult the government’s task of increasing prices of the three controlled fuel products, diesel, kerosene and domestic An empowered group of ministers is expected to meet soon to decide on the issue. Petroleum Minister Jaipal Reddy, on a visit to Turkmenistan, decided to return late this evening, instead of the earlier plan of a Friday evening return.

Seeking to soften the blow, the ruling party asked the states where it was in power or had the majority to cut taxes on fuel. Congress-ruled Kerala and Uttarakhand decided to cut sales tax on petrol, making it cheaper by Rs 1.63 and Rs 1.87 a litre, respectively. The at its national executive left a decision on tax cuts to its state units wherever the party was in power.

Oil companies justified the rise. In a joint press conference, IndianOil Chairman and Hindustan Petroleum Chairman S Roy Choudhury said if the government directed them to reduce prices, they would follow. “We have not been instructed to decrease prices,” Butola said. He added the trend in the current fortnight pointed to a marginal price drop in An analysis shows if the current trend continues, the price could decline by nearly a rupee in the next fortnight.

“If you do not pay the market price, there will be no incentive for efficient utilisation. When the market price prevails, it leads to conservation,” Butola said. The non-revision of prices since November 4, 2011 had led to losses of Rs 4,651 crore for the three government companies IndianOil, Bharat Petroleum and Hindustan Petroleum. “Each company has a capacity to absorb losses. We have suffered to the extent we were capable of,” said Butola.

Both Butola and Roy Choudhury said oil companies needed to make profits to survive and ensure steady supplies.

“If we do not make profits, banks will stop lending, and our ability to buy crude oil will be affected. This will ultimately affect domestic availability,” Butola said.

Meanwhile, on the political scene, top party managers asked the government to put off raising diesel, kerosene and prices, fearing an electoral backlash in half a dozen states due to have assembly polls at the end of this year and next year.

Rajya Sabha MP Satyavrat Chaturvedi of the conceded the party was not happy prices had gone up but said, “There is a compulsion. What to do? Either you sacrifice the economy for immediate gains or all of us share the burden. There is no other option taking into account the economy worldwide.”

In a daring act, Guru S Nair, a little known party leader from the Maharashtra unit, wrote a letter to the Prime Minister, not just to express his dismay over the hike in the price of petrol and the high price of essential commodities, but also asking the government not to raise diesel and kerosene prices.

“I was shocked to note the Union Ministry (of Petroleum) has decided to increase the price of petrol. I am a common man and my entire family is depending on my earnings. Our neighbouring countries, who are members of the SAARC, are also buying petrol from other countries and using these fuels. But, compared to our country, the price (of fuel) in these nations is very low,” Nair wrote in his letter.

The government took solace from the fact that although allies like the Samajwadi Party and the Trinamool had criticised the hike, there had been few demonstrations or strike calls in protest. In Kolkata, pragmatism ruled.

“Our stand is well known. The final decision will be taken by the Chief Minister,” said a Trinamool minister in the Union government. Party sources say what might stop from withdrawing support to the Centre is that the Congress-led would manage to survive with support from the Samajwadi Party, which as 22 MPs. The Trinamool has 19.

First Published: Fri, May 25 2012. 00:41 IST